IAAO 102 EXAM 2026 TEST PAPER
QUESTIONS AND SOLUTIONS EXAMPREP
⩥ The underlying economic principle of 3 approaches to value. Answer:
substitution
⩥ Market Value is also known as. Answer: value in exchange
⩥ Most probable price the property will sell for in an arm's-length
transaction under normal conditions on the open market. Answer: market
value
⩥ Higher Cap Rate. Answer: Means Higher Risk and Lower Overall
Value
⩥ Lower Cap Rate. Answer: Means Lower Rise and Higher Overall
Value
⩥ Return of investment aka. Answer: Recapture Rate (or getting back
the amount invested)
⩥ Return on Investment. Answer: Overall Yield Rate (or discount rate;
profit realized in addition to getting back the amount invested)
,⩥ The nine factors influencing the decisions of investors. Answer:
Safety, Liquidity, Collateral, Time, Size, Management, Appreciation,
Income Tax Advantages, Leverage.
⩥ Time to convert to actual dollars. Answer: Liquidity
⩥ Collateral. Answer: The entire investment in a savings account can be
used as collateral for a loan. However, lending institutions generally will
only allow a percentage of the real estates market value to be used as
collateral.
⩥ Leverage. Answer: The borrowing of funds in hopes of earnings
greater return than the cost of the borrowed funds.
⩥ 3 types of leverage.. Answer: Positive negative neutral
⩥ The benefits from borrowing funds exceed the costs of borrowing..
Answer: Positive leverage
⩥ An investment situation in which the cost of borrowed funds is exactly
equal to the yield provided by the investment.. Answer: Neutral
,⩥ occurs when borrowed funds cost more than the income the funds
generate. Answer: Negative leverage
⩥ Cash, Trust Deed, Land Contract, Mortgages. Answer: Four types of
real estate financing
⩥ Trust Deed. Answer: a legal instrument similar to a mortgage that
transfers the title of a property to a trustee. The borrow conveys the title
to a trustee for the benefit of the lender but retains the right to use and
occupy the property. Used to eliminate the need for a foreclosure
proceeding against the borrower in the event of of a default.
⩥ Land Contract. Answer: aka as contract for deed or installment sales
contract. the purchaser agrees to pay a small down payment when the
contract is signed with the balance is specified amounts over the term of
the contract.
⩥ 7 types of mortgages. Answer: First Mortgage, Junior Mortgage (2nd),
Purchase Money Mortgage, Construction Loan Mortgage, Open End
Mortgage, Chattel Mortgage, Package Mortgage.
⩥ One of the 3 approaches to value in which the appraiser derives a
value indication by converting anticipated benefits through ownership of
income producing property is the _______________
_________________.. Answer: Income Approach
, ⩥ Real estates competes with other investments for the investors dollar.
As an investor analyzes various opportunities what will they consider
(5)?. Answer: Cost (am I giving up something else to do this), what will
i get back, when will i get it back, risk associated with investment, the
return compared to other investments.
⩥ The economic principle of ____________ states that value is created
by the expectation of benefits to be derived in the future.. Answer:
anticipation
⩥ The economic principle of ______________ stats that the a property's
maximum value tends to be set by the lowest cost or price at which
another property of equivalent utility can be acquired.. Answer:
substitution
⩥ Competition is created by the potential for profits. However,
competiton among sellers may lead to ________________, which
reduces prices and profits.. Answer: oversupply
⩥ Competition among buyers may lead to _______________________,
which increases prices and profits to sellers.. Answer: shortages
⩥ The ________________ rate reflects the return of the investment in
the wasting asset.. Answer: recapture
QUESTIONS AND SOLUTIONS EXAMPREP
⩥ The underlying economic principle of 3 approaches to value. Answer:
substitution
⩥ Market Value is also known as. Answer: value in exchange
⩥ Most probable price the property will sell for in an arm's-length
transaction under normal conditions on the open market. Answer: market
value
⩥ Higher Cap Rate. Answer: Means Higher Risk and Lower Overall
Value
⩥ Lower Cap Rate. Answer: Means Lower Rise and Higher Overall
Value
⩥ Return of investment aka. Answer: Recapture Rate (or getting back
the amount invested)
⩥ Return on Investment. Answer: Overall Yield Rate (or discount rate;
profit realized in addition to getting back the amount invested)
,⩥ The nine factors influencing the decisions of investors. Answer:
Safety, Liquidity, Collateral, Time, Size, Management, Appreciation,
Income Tax Advantages, Leverage.
⩥ Time to convert to actual dollars. Answer: Liquidity
⩥ Collateral. Answer: The entire investment in a savings account can be
used as collateral for a loan. However, lending institutions generally will
only allow a percentage of the real estates market value to be used as
collateral.
⩥ Leverage. Answer: The borrowing of funds in hopes of earnings
greater return than the cost of the borrowed funds.
⩥ 3 types of leverage.. Answer: Positive negative neutral
⩥ The benefits from borrowing funds exceed the costs of borrowing..
Answer: Positive leverage
⩥ An investment situation in which the cost of borrowed funds is exactly
equal to the yield provided by the investment.. Answer: Neutral
,⩥ occurs when borrowed funds cost more than the income the funds
generate. Answer: Negative leverage
⩥ Cash, Trust Deed, Land Contract, Mortgages. Answer: Four types of
real estate financing
⩥ Trust Deed. Answer: a legal instrument similar to a mortgage that
transfers the title of a property to a trustee. The borrow conveys the title
to a trustee for the benefit of the lender but retains the right to use and
occupy the property. Used to eliminate the need for a foreclosure
proceeding against the borrower in the event of of a default.
⩥ Land Contract. Answer: aka as contract for deed or installment sales
contract. the purchaser agrees to pay a small down payment when the
contract is signed with the balance is specified amounts over the term of
the contract.
⩥ 7 types of mortgages. Answer: First Mortgage, Junior Mortgage (2nd),
Purchase Money Mortgage, Construction Loan Mortgage, Open End
Mortgage, Chattel Mortgage, Package Mortgage.
⩥ One of the 3 approaches to value in which the appraiser derives a
value indication by converting anticipated benefits through ownership of
income producing property is the _______________
_________________.. Answer: Income Approach
, ⩥ Real estates competes with other investments for the investors dollar.
As an investor analyzes various opportunities what will they consider
(5)?. Answer: Cost (am I giving up something else to do this), what will
i get back, when will i get it back, risk associated with investment, the
return compared to other investments.
⩥ The economic principle of ____________ states that value is created
by the expectation of benefits to be derived in the future.. Answer:
anticipation
⩥ The economic principle of ______________ stats that the a property's
maximum value tends to be set by the lowest cost or price at which
another property of equivalent utility can be acquired.. Answer:
substitution
⩥ Competition is created by the potential for profits. However,
competiton among sellers may lead to ________________, which
reduces prices and profits.. Answer: oversupply
⩥ Competition among buyers may lead to _______________________,
which increases prices and profits to sellers.. Answer: shortages
⩥ The ________________ rate reflects the return of the investment in
the wasting asset.. Answer: recapture
